Small Business Management

1. Sole proprietorship (other wise know as Sole Trader) 29%
2. Partnership 16%
3. Company 33%
4. Trusts 22%

l  No distinction between business and individual owner

l  All assets, liabilities and profits are owners

l  Advantages:

– ease of formation

– total control over the business

– relatively cheap to set up

– few regulations

l  Disadvantages:

– unlimited liability

– limited resources

– lack of continuity

– tax

A relationship between people carrying on a business in common, with a view to sharing profit

l  Advantages:

– ease of formation

– ease of operation

– distinct existence

– combined resources and direct rewards

- Partnership agreement counters disadvantages

l  Disadvantages:

– unlimited joint liability

– potential conflicts

- dividing authority

– lack of continuity

- Transfer / Adding ownership difficult

l  Limited to between 2 – 20 partners (by law)

l  Exceptions to the law

-          50 medical practitioners, patent attorneys, share brokers

-          100 Architects, pharmaceutical chemists, veterinary surgeons

-          400 Legal practitioners

-          1,000 Accountants

l  Must be registered with State Fair Trade Office

l  1) General Partner – managerial control & authority to act on behalf of the business

l  1) Limited Partner – can not take part in the management of the business & can not act on behalf of the business & limited LIABILITY

l  Limited partnerships – good for contributing money to business but not involved in management and running of business

“Incorporated Limited Partnership” – where partnership actually becomes a separate legal entity like a company

l  A company is a separate legal entity which has an existence independent of its owners and managers

-          private companies and

-          public companies

l  Advantages:

– perpetual existence

– limited liability

– rights of a natural person

l  Disadvantages:

– high set-up and maintenance costs

– spread ownership

A trust is an obligation imposed on a person (called a trustee) to deal with the trust property over which he or she has control, for the benefit of persons (called beneficiaries).

l  Advantages:

– income splitting

– lower capital gains tax

– control

– asset protection

– stability

l  Disadvantages:

– small business capital gains tax

– potential conflicts following divorce or death

– high risks if assets are hidden

– legislative risk

1)      – trademarks

2)      – industrial                                        designs

3)      – copyrights

4)      – trade secrets

5)      -  patents

IP represents the property of the mind
or intellect.

IP is often a valuable asset and it is important that it be clearly identified and safeguarded.

l  A trademark is a sign that is used to distinguish the products and services of one trader from those of another.

l  It can be a letter, number, word, phrase, shape, logo, picture, aspect of packaging or a combination of these.

l  While a patent protects the function, the trademark protects the look of a business.

l  A design refers to any aspect of the shape or configuration of the whole or part of an article.

l  The right provided by a design registration is in many ways similar to that provided by a patent but the protection is limited to the appearance of the product.

l  Patents are exclusive rights to exploit (e.g. produce and sell) a particular product or use a specific process for a certain period of time.

l  Patents are only granted for inventions that are new

l  Copyright is an exclusive legal right to literary, musical or artistic work and the right to produce or reproduce that work by making copies or performing the work.

l  Many copyright laws also contain provisions for the protection of ‘works of applied’ art, for example artistic jewellery, furniture and greetings cards.

l  Copyright is an automatic right that arises when a work is created.

l  A trade secret is any idea, formula, pattern, device, process or information that provides the owner with a competitive advantage in the marketplace

l  Includes marketing plans, financial forecasts, employees’ rosters and laboratory notebooks

l  Industry regulations administered by a number of different authorities. (eg. Plumbers Licensing Board)

l  A business owner must comply with all necessary permits and licences.

l  Ability to Licence your business / service - can be a primary indicator of the viability of a proposed business idea: 

l  Most countries have laws governing what is ‘acceptable’ business conduct

l  These laws generally prohibit
anti-competitive behaviour such as:

                – deliberately misleading customers

                – price-fixing

                – the formation of cartels

                – unfair conduct against competitors

•          Usually only 1 or 2 owners

•          Financing provided by the owner

•          The business has limited market share

•          Often has a limited life span

•          Sometimes run on a part-time basis

•          There is a low level of net profit

•          Owners management discretion

•          Limited product or service offering

•          Is frequently a home-based business

•          Geographically limited

•          Often a family-based business

•          Only located in the private sector

•          Be less likely to access government assistance

•          Be less likely to export

•          Use less external financing

•          Be less likely to want to grow bigger

•          Be more likely to fail

•          Differences in managerial perspective

Small firms tend to:

•          Have more female owner/managers

•          Have managers with fewer qualifications

•          Have fewer unionised employees

•          Operate for fewer hours each week

•          Less likely to use formal management methods

q  Starting a new business

q  Purchasing an existing business

q  Entering a franchise system

q  Comparison of options

q  Procedural steps when starting a business venture.

•          Why is the business being sold?

•          Will existing staff remain if the business is sold?

•          What debts/liabilities exist?

•          Can all licenses and permits to operate be transferred?

•          How accurate are the financial accounts?

•          Is the business part of a Franchise?

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•          Is it novel?

•          Who owns the technology?

•          Is it patentable?

•          Does it work?

•          Is it better than rivals?

•          What are the applications?

•          Are there commercial advantages?

Business strategy and planning

Critical questions to ask in evaluation

1 Can the product / service  be patented or copyrighted?

2 Has a prototype been thoroughly tested?

3 Has it survived trade shows?

4 Is it easily understood?

5 What is the overall market? What are the market segments?

6 What has market research revealed?

7 What distribution and sales methods?

8 How will the product be made? cost?

9 Will it be developed and licensed or sold away?

10 Do you have the necessary skills?

–  is the process of determining how to move to a desired future state. 

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1. Degree of Rivalry among existing competitors
2. “Threat of New Entrants
3. Bargaining Power of Suppliers
4. Bargaining Power of Buyers
5. Threat of Substitute Products & Services 

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•          What drives your competitors goals?

•          What likely moves will the competitor make?

•          Where is the competitor vulnerable?

•          How is the business currently competing?

1.     A statement of goals and objectives

2.     Efficient use of time

3.     Consideration of alternatives

4.     Better internal management and staff development

5.     Better financial management

A business adviser is someone who works with client businesses to provide specialised skill and knowledge in one or more particular aspects of business operations.